Boris Johnson's support for Brexit causes British pound to tumble

Boris Johnson's support for the Brexit campaign has pushed the pound lower against major currencies, reflecting growing fears that the vote for Britain to leave the European Union will succeed.

The mayor of London late on Sunday revealed he would vote in favour of the Brexit in Britain's EU membership referendum scheduled for June 23.

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London mayor Boris Johnson announces in February his support for the campaign for the UK to leave the European Union, pitting him against Prime Minister David Cameron.

"There is only one way to get the change we need, and that is to vote to go, because all EU history shows that they only really listen to a population when it says 'No'," Mr Johnson wrote in Britain's Daily Telegraph.

"We will hear a lot in the coming weeks about the risks of this option; the risk to the economy, the risk to the City of London, and so on; and though those risks cannot be entirely dismissed, I think they are likely to be exaggerated."

London mayor Boris Johnson has announced he will back the Brexit proposal.
London mayor Boris Johnson has announced he will back the Brexit proposal. Photo: Getty Images

British Prime Minister David Cameron will vote to stay in the EU.

It is speculated that Mr Johnson's decision is motivated by a play for the Tory leadership to succeed Mr Cameron.

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Previously, Mr Johnson had argued Britain should be closer aligned to Brussels.

The pound was the biggest mover in global currencies on Monday, falling 0.85 per cent against the greenback.

The mayor's comments sent the currency to around $US1.428 from $US1.442.

Against the Australian dollar, it fell to $1.998 from $2.015.

AllianceBernstein​ fixed income portfolio manager John Taylor said it was unclear how the vote would unfold, despite what the polls indicated.

"What we can probably say with some degree of uncertainty is that's going to weigh on the pound," Mr Taylor said.

"As the Brexit vote comes closer, do international investors become more cautious? Because they've been big buyers of gilts."

It was also unclear what the policies, regulations and trade relationships after a Brexit would look like.

"What is a bigger issue is if the UK does vote to leave, but Scotland, as a country, the vote there is actually for them to stay – that might trigger another referendum for Scotland to break away from the UK. So you're layering uncertainty onto uncertainty," Mr Taylor said.

Immigration had overtaken the debate around the economic interest in influencing how people might vote, the fund manager said.

"It really has become a bit of a vote on [immigration] at this stage."

The growing risk for the pound comes as expectations for a rate hike this year by the Bank of England fade because of low inflation.

"You can easily see them not raising rates at all this year," Mr Taylor said.

"The reality of Brexit would usher in a very uncertain time for the UK economy with the practicalities of leaving the EU to be worked out and actioned and would be negative for sterling," ANZ's senior economist, Amber Rabinov, said in research published last week.

Based on her analysis, a Brexit would undermine London-based financial institutions' access to the EU's single market; risk holding back investment; force the renegotiation of trade agreements; increase money market rates; and force the Bank of England to raise rates in the event of a collapse in the currency.

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